McCormick Eliminated Hundreds of Jobs in Pittsburgh as a CEO, Reports WHYY  

PENNSYLVANIA — Connecticut hedge fund CEO and mega-millionaire David McCormick has been caught lying again, this time about being a “job creator.” Breaking reporting from WHYY exposes McCormick’s real record of laying off hundreds of workers in Pittsburgh as CEO of Freemarkets.

WHYY: David McCormick claims he created ‘hundreds of jobs’ in Pennsylvania. Records say otherwise

  • David McCormick, the Republican nominee for Pennsylvania’s U.S. Senate seat, touts himself as a job creator, ready to bring his business acumen to serve Pennsylvanians.
  • However, McCormick’s tenure as the head of a FreeMarkets — a Pittsburgh-based business-to-business software company — has come under scrutiny, and the claim that he created “hundreds of jobs” in Pittsburgh appears unsupported by evidence.
  • By the time McCormick became president in October 2002, the company had 1,068 employees. Just a few months later, McCormick became CEO and joined the board of directors. By the end of 2003, in his first year as CEO, the company had reduced its workforce by 100 employees. Then, in January 2004, McCormick cut the company’s workforce by 77 employees, 45 of whom were at the Pittsburgh headquarters.
  • In February 2003, right after a round of layoffs, McCormick announced the company would spend $4.3 million to open an online auction monitoring center in India, employing more than 100 people. He added that the New Delhi location would potentially include software development in the region, taking advantage of lower labor costs.
  • […] the numbers suggest that the company shed local jobs under McCormick while growing overseas operations. 
  • During McCormick’s term as CEO, FreeMarkets lost millions of dollars in revenue, operated at a loss and sold off assets in addition to laying off employees.
  • Possibly as a result, McCormick started pursuing a merger with a West Coast competitor, which resulted in more local job losses.
  • In June 2003, McCormick initiated discussions with Robert Calderoni, chairman and CEO of Ariba, a Palo Alto-based FreeMarkets competitor, about the possibility of a “strategic relationship of some form” and potentially a “business combination.” After more discussions, McCormick approached his board about the idea in September.
  • From the beginning, the company made clear its intent was to save money by reducing “redundancies,” including those resulting from duplicative jobs. According to SEC filings, FreeMarkets told its shareholders that a benefit of the merger would lead to “at least $25 million in annual potential cost savings, through the consolidation of redundant facilities, personnel and overhead.”
  • McCormick told the Pittsburgh Post-Gazette, “There will certainly be redundant functions and consolidation of those functions.” In a July 2004 deposition regarding the merger, he told the court that job losses were expected “particularly in our technology development organization where our plan as part of the merged company is to eliminate that completely.” The next month, McCormick told Ariba shareholders what they “accomplished” leading up to the merger: “We have already eliminated 150 positions and have plans to eliminate another 100 positions over the next two quarters.”
  • Indeed, by the time the merger was complete, in July 2004, FreeMarkets had laid off or eliminated 150 positions. By December 2005, the combined company had reduced its workforce by an additional 100 employees, for a grand total of 250 lost jobs. At least 100 of those jobs were in Pittsburgh.
  • The merger, however, profited McCormick quite well. He became president of Ariba and a member of its board of directors, drawing $500,000 in annual salary, compared to the $350,000 he made at FreeMarkets, and was eligible for an annual bonus targeted at $300,000. He was also awarded 83,333 shares in Ariba, valued at $921,663, and 500,000 shares of stock options that had a potential realizable value between $3.4 million and $8.8 million. In September 2005, McCormick resigned as president of Ariba to work in the George [W.] Bush administration and received another $1,701,699 in severance.